Charles Kauthammer And Energy Policy – Damn someone I can agree with

This is so weird. This column makes sense. Don’t get me wrong, I do not like this guys thinking much, but this is a pretty lucid moment.

Pump Some Seriousness Into Energy Policy

By Charles Krauthammer

Friday, November 11, 2005

Thank God for $3.50 gasoline. True, we had it for only a brief, shining moment, and there is not much good to be said about the catastrophic hurricanes that caused it. But the price was already inexorably climbing as a result of 2.3 billion Chinese and Indians industrializing. Their increased demand is what brought us to the energy knife’s edge and makes us so acutely vulnerable to supply disruptions.

Yet, the Senate is attacking the problem by hauling oil executives to hearings on “price gouging.” Even by Senate standards, the cynicism here is breathtaking. Everyone knows what the problem really is. It’s Economics 101: increasing demand and precariously tight supply.

Yet for three decades we have done criminally little about it. Conservatives argued for more production, liberals argued for more conservation and each side blocked the other’s remedies — when even a child can see that we need both:

Demand . Just yesterday we were paying $3.50 a gallon at the pump and were ready to pay $4 or $5 if necessary. No blessing has ever come more disguised. Now that we have lived with $3.50 gasoline, $3 seems far less outrageous than, say, a year ago. We have a unique but fleeting opportunity to permanently depress demand by locking in higher gasoline prices. Put a floor at $3. Every penny that the price goes under $3 should be recaptured in a federal gas tax so that Americans pay $3 at the pump no matter how low the world price goes.

Why is this a good idea? It is the simplest way to induce conservation. People will alter their buying habits. It was the higher fuel prices of the 1970s and early ’80s that led to more energy-efficient cars and appliances — which induced such restraint on demand that the world price of oil ultimately fell through the floor. By 1986 oil was $11 a barrel. Then we got profligate and resumed our old habits, and oil is now around $60. Surprise.

The worst part is that much of this $60 goes overseas to foreigners who wish us no good: Wahhabi Saudi princes who subsidize terrorists; Hugo Chavez, the mini-Mussolini of the Southern Hemisphere; and (through the fungibility of oil) the nuclear-hungry, death-to-America Iranian mullahs. This is insanity. It makes infinitely more sense to reduce consumption, drive the world price down and let the premium we force ourselves to pay at the pump (which begins the conservation cycle) go to the U.S. Treasury. If the price drops to $2, plow that $1 tax right back into the American economy by immediately reducing, say, Social Security or income taxes.


To read the rest of the piece, go to the Washington Post’s website. More next week.


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